It's not always easy to tell the difference between a high-risk (but legal) scheme and an outright scam, and sometimes it takes years for the truth to emerge. Read on to find out the red flags that should stop you in your tracks.
1. Are they authorized?
When considering an investment firm or adviser, the first step is to check whether they hold a regulatory license. Regulated firms and advisers must adhere to strict rules regarding mis-selling.
If a company is carrying out regulated activities without authorization, this is a significant red flag and is likely to be fraudulent.
2. Are you stressed?
Is your investment “advisor” putting a lot of time pressure on you? Are you told that you need to send money within hours or days or the “deal” will be gone?
At best, this is a highly unethical approach that can put a huge amount of pressure on you and prevent you from doing your due diligence. At worst, it's a complete scam. Companies or individuals using this tactic are extremely unprofessional - don't give them a penny.
3. Has anyone asked you to keep it confidential?
Scammers will try to isolate you from anyone who might cast doubt on their false claims.
They may ask you not to disclose the "investment" to your partner or friends. This is an extreme red flag. A respected company will never mind if you pause the conversation to seek someone else's opinion and conduct further research.
When it comes to your hard-earned money, take your time, do your homework, and don't rush.
Recognizing Red Flags – 7 Signs of an Investment Scam
Investing is inherently risky and may go up as well as down. Your money is always at risk.
Any brochure that promises double-digit returns, or that suggests the scheme will not fail, should be viewed with suspicion.
5. Did someone contact you suddenly?
Have you ever received a cold call, email, or text message claiming to increase your wealth?
Ask yourself why a successful professional company would contact you out of the blue without your permission.
6. Have you followed a lead on social media?
Investment scammers use Facebook, Instagram and other platforms to promote their schemes to large numbers of people.
This can be done through paid advertising, or through fake profiles that showcase a fake millionaire lifestyle, including expensive cars, vacations, and designer clothes. These fake profiles attempt to attract victims by promising to share the "secrets" of their wealth.
7. Is there any romantic element here?
So-called "killer scams" are a terrifying mix of love and investment scams, where victims are tricked into believing they are in a relationship.
The name was coined by scammers who "fatten" their victims with love and kindness before executing the investment portion of the scam. First contact is often through a dating platform or, in some cases, by pretending to have sent the wrong text or called the wrong number to approach the victim.
After weeks or even months of grooming and "love bombing," the fraudster claims to have had some success investing - usually in cryptocurrency or forex - and then offers to invest some of the victim's funds.
When the scam is exposed, the victims not only lose their money, but also their new "partner."
